May 2014

May 28, 2014

Imagine that you and your fiancé paid for your wedding venue, only to have that venue become bankrupt and closed. For many couples without wedding insurance, their money paid to a wedding venue that eventually declares bankruptcy is lost.

In 2013, the average wedding budget was $29,858. For many people, $20,000-$30,000 is a couple’s life savings. With wedding venues offering all-inclusive packages, the loss is often not only their reception venue, but also their DJ, florist, food, and other services. The couples who suffer this loss usually have very little recourse to regain funds associated with the venue.

How may a couple avoid this loss? The answer is wedding insurance.

Wedding insurance costs well under $1000, “maybe $250,” or even only $160. Wedding insurance saves the couple, who would have otherwise lost their partial or full deposit(s) for their wedding by reimbursing the couple for payments made toward the wedding. Wedding insurance policies often cover any deposits lost if the date changes, or the officiant or deejay is unavailable.

In addition to purchasing wedding insurance, it may also be beneficial to pay vendors with a credit card because The Fair Credit Billing Act allows consumers to file a dispute if a product or service purchased was not delivered as originally agreed.

Be wary of businesses that ask you to pay for the venue, service, or product in full. Be sure to ask if the business offers a payment plan to ensure that you won’t suffer a loss of the money should the business declare bankruptcy.

May 21, 2014

On May 6th, Senator Elizabeth Warren introduced a new bill in the senate that would reduce interest rates for many federal student loans. The bill is targeted at student loans issued before July 2013, which have a significantly higher interest rates than those issued today.

Senator Warren indicated that “many people who took out student loans before July 1 of last year are locked into a rate of nearly 7 percent. Older loans run 8 percent, 9 percent, and even higher.” Her new bill would allow borrowers to lower the interest on these loans to current rates: “3.86 percent for undergraduate loans, 5.41 percent for graduate loans, and 6.41 percent for PLUS loans.”

She also noted that the federal government is bringing in huge profits on student loans; for example, “[t]he GAO recently projected that the government will bring in $66 billion just on the slice of student loans from 2007 to 2012. Those are the kinds of profits that would make a Fortune 500 CEO proud.”

Warren indicated that the federal government should not be using student loans as a money-making measure, but rather a vehicle to invest in students’ future. She expressed a goal of reducing student loan rates to a point where the government would not earn any profits from the student loan program. “Forty million borrowers in this country have student loan debt, and many of those individuals could save hundreds or even thousands of dollars a year with this bill. They need this help now.”

Student loan debt is exceedingly difficult to discharge through the bankruptcy process, and therefore, can often impose a large burden on individuals experiencing tough financial times. If enacted, Warren’s bill could serve to reduce at least some of that burden.

May 16, 2014

Both consumer and business bankruptcy filings continued to slide downward in April 2014, when compared to the same period one year ago. It is presumed that the decline is due to the continuation of low interest borrowing rates for businesses and less consumer spending for individuals. Whether this is due to consumers being smarter, or a reflection of tighter credit limits imposed by lenders and credit card companies, is uncertain.

Based on information provided by Epiq Systems and the American Bankruptcy Institute (ABI), the total number of bankruptcy cases filed in the US declined 13% when comparing April 2014 to April 2013. During the month of April 2014, there were a total of 87,954 cases filed, compared to a total of 100,770 cases filed in April of 2013. Further examinination of those numbers shows that consumer bankruptcy filings represented a 12% drop, while commercial filings accounted for a 24% decline. Comparing April 2014 to April 213, chapter 11 corporate reorganization filings also declined 4% (683 filings vs 711 filings).

The ABI has suggested that the decline is due to the sustained low interest rates for business borrowers, sluggish consumer spending, and the high costs required for all bankruptcy filings, all of which contributed to lower totals across all segments of bankruptcies.

It will be interesting to see if there is a jump in filing during the next few months, caused by improvements in the economy, coupled with more consumers receiving their tax, which they can then use to pay for their legal and filing fees.